Why Airlines Can’t Control Rising Aviation Fuel Prices

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Despite their campaigns and agitations, Nigerian flag carriers have failed to influence the price of aviation fuel and are now pitted against oil traders, writes Chinedu Eze

In recent times, the aviation industry has caused a lot of anxiety and worry in the minds of many Nigerians. Air travelers were appalled when the Air Operators of Nigeria (AON) announced that they would be suspending flight operations on May 9, 2022, but ultimately that did not come to the relief of many.

This is the price of aviation fuel, known as Jet A1. Airlines said prices ranged from N600 per liter to N700 per litre; depending on which part of the country an airline purchases the product from. If an operator buys the product in Maiduguri, he will pay N700 per litre, in Kano N680 per litre, in Abuja N650 per litre, and in Lagos N600 per litre.

But in a recent statement, oil traders argued that they were not selling the product at 700 naira per litre. Traders under the Major Oil Marketers Association of Nigeria (MOMAN) have denied reports that Aviation Turbine Kerosene (ATK), otherwise known as aviation fuel, was being sold for 700 naira per liter in some parts of the country.

MOMAN Executive Secretary Clement Isong explained that aviation fuel is sold by traders at a rate of between 540 and 550 Naira per liter on the tarmac at Lagos airports and between 570 and 580 Naira per liter at the airport. furthest airport from Lagos. Isong also denied knowledge of the sale of aviation fuel at 700 naira per liter all over the country and acknowledged that the Nigerian National Petroleum Company (NNPC) had interfered in the importation of the product.

Cheaper aviation fuel

MOMAN also argued that in West Africa, aviation fuel is the cheapest in the sub-region. He also said, in comparative terms, that the aviation industry already benefits from government intervention when local prices are compared to West African regional prices, “despite the deregulated status of aviation fuel”. Marketers have warned that the situation is unsustainable given the country’s already huge N4 trillion annual subsidy costs.

He explained that for aviation fuel, verifiable prices in West Africa ranged from $1.25 per liter in Ghana to $1.51 per liter in Liberia, saying that even then the product remained rare in the sub-region.

MOMAN contended that due to the intervention of NNPC over the past few weeks, aviation fuel has been landed in tanks at marine terminals in Nigeria at between N480 and N500 per litre, depending on logistical efficiency. of the operator.

He further explained that “due to the high costs of the specific handling of the Jet A1 (special transport and continuous filtration), the product is sold on the Ikeja tarmac (our benchmark), between N540 and N550 per liter and at other airports between N570 and N580 per litre.

“During this period of NNPC intervention, as the NNPC uses the nominal exchange rate of the Central Bank of Nigeria (CBN), no independent importer could import aviation fuel as they cannot access foreign currency at the same rate, leaving NNPC as the main importer of aviation fuel for now, even though the product is deregulated.

However, marketers admitted that these interventions were sometimes necessary to mitigate shocks and help the economy, the operating environment and the public adapt to new realities while efforts were made and innovations were introduced. to optimize costs and increase efficiency.

While noting that these interventions cannot be permanent, MOMAN expressed hope that the war in Ukraine will end soon.

He also expressed hope that the integration of products from local refineries, including the four NNPC refineries being rehabilitated, the Dangote refinery under construction as well as the modular refineries into the supply chain, would mitigate the high costs. supported by the government and the Nigerians.

However, aviation industry watchers had argued that Nigeria had the passenger traffic and the number of planes, so comparing it to other West African countries was a weak argument. They also noted that as an oil producer, the citizens of the country stand to enjoy certain benefits simply by producing the product locally and lamented that it is a failure of the government that Nigeria does not produce petroleum products locally. They also pointed out that premium motor gasoline, which is the price of gasoline and diesel in other West African countries, is cheaper than that obtained in Nigeria; marketers should therefore not isolate aviation fuel.

Furthermore, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said that the theft of crude oil in the Niger Delta region has made it difficult to provide foreign exchange to airline operators, adding that the CBN does not would grant any concession to the airline operators as it would amount to granting a subsidy (on the price of kerosene) to the airline operators.

No subsidy

But the airlines had said that contrary to what MOMAN was circulating, they had never asked for subsidies and did not even support subsidies in any way. Aero Contractors CEO Captain Abdullahi Mahmood told THISDAY in a phone interview that Nigerian carriers have never applied for government subsidies but have asked the government to review prices so they will come back. at the level at which Nigerians could travel. air.

He said airlines do not want to pass on the new cost of aviation fuel to passengers because if they did, passengers would pay between N100,000 and N150,000 for an hour flight.

“We don’t want subsidies. We shouted because we are aware that the government knows what to do when it has a crisis like this. We also know that if the government fully supports the import, the price of the product will be cheaper than what the distributor will bring. The airlines have never asked for a subsidy. We are not asking for a reduction in the price of aviation fuel in our interests. We do this for passengers because if we push the cost for customers, tickets will cost from N100,000 to N150,000.

The aeronautical industry is a critical sector. This is why the US government is giving bailouts to airlines. All airlines are private, the government is bailing them out because of the vital role they play in the national economy and the fact that they employ thousands of citizens,” he said.

He recalled that in 2008 the US government gave a bailout to General Motors and other US automakers, which helped them reorganize their production and today they are doing better.

“No airline said, give us a subsidy. We want Nigerian travelers to pay less money for tickets. airline requires a lot of capital.Aviation is the catalyst of the economy of any country and this is due to the movement of people the economic engine.Even now how many people travel by plane at 50,000N for a flight? ‘one o’clock ?

“We protested against the increase in the price of aviation fuel because we wanted to get the government’s attention to consider how they can help. If we continue to raise ticket prices, passengers will avoid airports Airlines could be forced to shut down and Nigeria’s airline death rate will rise Employees will lose their jobs and go into the already saturated job market This is not what the operators want Many between them have invested so much in aviation. There is a crisis,” he said.

Mahmood said what makes it more difficult is that the increase comes suddenly, accusing oil distributors of not giving notice before raising the price of their product.

“There is no airline that will experience such a spike in the price of aviation fuel that will not be shocked. We buy large quantities of the product. Such a high price is very difficult because of the volume of liters that we (Boeing 737 consumes 3409.57 liters of fuel for one hour of flight) What we buy is fuel from the sector.

A flight from Lagos to Abuja, for example, will buy fuel from the sector. It takes fuel which will take you to Abuja and additional fuel which will allow you to glide and fly to another airport in Abuja which is Mallam Aminu Kano International Airport, Kano. So you cannot buy just any fuel that takes you to Abuja. All of this must be taken into consideration,” said the CEO of Aero Contractors.

The airlines and oil traders appear to have reached an amicable interim solution with the intervention of federal government agencies, the National Assembly and others. But what will provide a permanent solution to this problem is the local refining of aviation fuel and other petroleum products.

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